JOHANNESBURG - The departure of Michael Sachs from the National Treasury signalled an erosion of SA’s institutions, economists said on Monday in response to the news that the deputy director-general in the budget office had tendered his resignation.
Alexander Forbes chief economist Lesiba Mothata said: “There’s now a clear erosion of the institutional strength that was resident at Treasury.”
Mothata added that a credit ratings downgrade of SA next week was now a certainty.
Credit ratings agencies S&P Global Ratings and Moody’s Investors Service are both expected to review SA’s credit rating on 24 November.
Both agencies have consistently flagged the country’s institutional strength and commitment to fiscal consolidation.
“The government’s behaviour is not consistent with investment grade, but is consistent with junk status,” Mothata explained on Monday.
“What’s clear is that there are completely different ways of doing things at Treasury, starting with changes in the budget process. Sachs leaving sends an ominous message,” he added.
Economist Thabi Leoka said: “It’s a great loss for National Treasury, but also for the country. I could equate this loss to the loss of a finance minister.”
The Treasury confirmed on Monday that Sachs had resigned. He had done so in light of recent events surrounding the budget process, which had undermined its efficacy.
The co-head of fixed income at Investec Asset Management, Nazmeera Moola, said: “I don’t think Michael’s departure is the final nail in the coffin for rating agencies. What is of concern is if the Presidency is now recklessly pursuing higher education without being cognisant of the budget process, then that would signal a ratings downgrade.”
On Monday, Finance Minister Malusi Gigaba said he was aware of the need to protect the integrity of the budget system.
ANC presidential hopeful Cyril Ramaphosa has also weighed in on the matter.
#Ramaphosa (On Michael Sachs resignation); ‘Budget office in our economy is the most important office. It drafts the budget of our country, makes sure financial resources are properly allocated. He knew everything that has everything to do with the budget’ #CR17NewDeal— Thulasizwe Simelane (@ThulasSims) November 13, 2017
#Ramaphosa; ‘It’s most unfortunate that he (Michael Sachs) has chosen to resign and he’s resigning because of the instability he perceives in that department. I’m gonna have a discussion with Minister about stability in Treasury. Hopefully Sachs can be persuaded to come back’— Thulasizwe Simelane (@ThulasSims) November 13, 2017